On Truly Privatizing Fannie Mae and Freddie Mac: Why it's Important, and How to Do it

NYU Working Paper No. 2451/26102

Number of pages: 25Posted: 13 Oct 2008

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Date Written: June 2005

Abstract

The special status, large sizes, and recent rapid growth of Fannie Mae and Freddie Mac have created and/or contributed to a set of difficult policy problems that include: misguided and excessive subsidization of housing in the U.S.; the safety and soundness of the two companies; systemic risk; residential mortgage terms and structure; and the inherent efficiencies of the two companies. The two companies are embedded in a much larger web of policies that broadly and inefficiently encourage housing construction and consumption. The true privatization of the two companies is the best solution to the problems that specifically involve them and would constitute a good start toward correcting the excesses of American housing policy. This true privatization can be accomplished in a relatively clean and straightforward fashion.

White, Lawrence J., On Truly Privatizing Fannie Mae and Freddie Mac: Why it's Important, and How to Do it (June 2005). NYU Working Paper No. EC-05-09. Available at SSRN: https://ssrn.com/abstract=1282533

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